Brewing

Blue Moon vs. Craft Beer Rivals: MillerCoors Strikes Back

A worker pours granulated orange peels into a brew kettle for Blue Moon beer at the Molson Coors brewery in Golden, Colo., in 2009

Aficionados of craft beer long ago dismissed Blue Moon, owned by MillerCoors, as a phony artisanal brew created by a mega-company to exploit a rapidly expanding market. In recent months, small beermakers have stepped up their attacks, calling suds such as Blue Moon “crafty” for not spelling out their corporate parentage in ads or on their packaging. Microbreweries have reason to be defensive: Blue Moon, a Belgian-style white beer, had sales equal to 15 percent of the 13.2 million barrels of craft beer sold in the U.S. last year. Its success has even prompted Anheuser-Busch InBev (BUD) to introduce a white beer of its own called Shock Top.

Now, after years of quietly building its brand, Blue Moon is fighting the naysayers. It’s adding more artisanal brews, including a wine hybrid, and new marketing emphasizes the beer’s provenance and Belgian-trained brewmaster. Blue Moon is even taking credit for helping popularize the craft beer movement. “We should be proud to make beers that grow and are popular—that’s the American way,” says MillerCoors Chief Executive Officer Tom Long. “Being small and unpopular, what’s the utility in that?”

There’s no question MillerCoors has corporate blue blood running through its golden suds. The company is 50 percent owned by mass-market producer Molson Coors Brewing (TAP), with the rest held by London-based SABMiller (SAB:LN), the world’s No. 2 brewer. Blue Moon is the centerpiece of MillerCoors’s Tenth & Blake Beer, an operating unit created to capitalize on the rapid growth of craft and import brews and to help offset slowing sales of light beers.

The fight over Blue Moon’s legitimacy peaked last year when the Brewers Association, craft beer’s primary U.S. trade group, published a list of companies, including MillerCoors, that didn’t fit its definition of a “craft brewer.” The association knocked some brands for excluding parent companies from their labels. Craft brewers are “small, independent, and traditional,” according to the group’s definition. That means they produce fewer than 6 million barrels a year—it used to be 2 million until Samuel Adams maker Boston Beer (SAM) got too big to qualify. They also must be less than 25 percent-owned by a megabrewer and meet certain ingredient thresholds.

Freddy Bensch, co-founder of Atlanta’s SweetWater Brewing, says macrobrewers are trying to cash in without hewing to the handmade ethos of craft brewers. “It’s about empowering the consumer with the ability to understand who is really making their beer,” he says, “so they can make an educated and informed decision on who to support with their hard-earned dollars.”

In a CNN.com (TWX) op-ed, Long defended the quality of Blue Moon and beers from the company’s Jacob Leinenkugel Brewing unit and said such breweries operate autonomously. “Blue Moon Brewing Co. has been around long before the vast majority of craft brewers,” he says in an interview. “What exactly is crafty about that?”

Even critics such as Bensch acknowledge the merits of Blue Moon’s product, which is based on the Belgian witbier brewed with wheat and often spiced with coriander and orange. It’s a “great representation of the style,” he says. “They pretty much single-handedly revived the white beer category … in the U.S.” Yet MillerCoors has resisted putting its name on Blue Moon bottles and has no plans to do so. The beer’s creator, brewmaster Keith Villa, says leaving the parent off the label almost two decades ago was practical, not expedient. It mirrored strategies used by Toyota Motor (TM) for its Lexus luxury brand and Hallmark Cards for its cheeky Shoebox greetings line. Villa also worried buyers might be confused when the cloudy Blue Moon didn’t look and taste like MillerCoors’s clear beers.

Many Blue Moon drinkers don’t care where the product comes from as long as it tastes good, says JPMorgan Chase (JPM) analyst John Faucher. “What’s the advantage of letting people know that it’s by MillerCoors?” he asks. “The downside is the beer-snob factor. If there is no upside from doing it, then why take the risk?”

Blue Moon continues to add styles, including the Graffiti Collection, which features Pine in the Neck, a double India pale ale brewed with juniper berries. Specialty releases include Caramel Apple Spiced and Peanut Butter ales. And Facebook (FB) fans helped pick the ingredients for a limited winter mystery beer due in November.

Meanwhile, microbrewers continue to have a complex relationship with rivals owned by industry giants. While still pushing for more transparency, the Brewers Association has removed the list of supposed faux craft brewers from its website. And in October, craft brewers will strut their hops at the annual Great American Beer Festival in Denver. Blue Moon is a sponsor.